How did the Great Epidemic of 1918-1919 arise and what were its effects?
What does this tell us about the dynamics of global interaction? What do you think
would happen if a similar mutation took place in some common illness today?

Why was the death rate in the United States higher than it perhaps need have
been?

How did "the Stockmarket Crash" occur and what was its effect?

More specifically, how did "the Stockmarket Crash" lead to "the Great
Depression"?

What were the characteristics of Fascism, and what caused it rise during the
1930's?

In what sense was it "an extreme form of Romanticism"?

Who was John Maynard Keynes, and what was his strategy for maintaining a
balanced economy?

How did the Western nations attempt to implement Keynesian strategies? With
what effect?

What was the New Deal and what was it planned to do?

What finally brought the Great Depression to an end?

TEXT

The World War was itself bad enough, but the returning troops brought back a
deadly disease -- influenza. The best estimates of total
mortality from this epidemic range around fifty million, greater than the
battle casualties of all the combatants combined. Even though it could not
be compared to anything like the Black Death of the 14th century, for instance,
the Great Epidemic of 1918-1919 was the most recent great
epidemic to sweep the world and, if only for that reason, it is worth examining more
closely.

Influenza was not new to Europe. The first clearly identifiable and
datable epidemic had been in 1743 and the most recent had been in 1890,
the latter being an outbreak that spread throughout the world, passing
through the United States in 1892. The Great Epidemic evolved in a process
that took the form of three waves, each lasting no more that a few weeks.

The first wave began in May/June 1918 and coincided with the arrival of
the first U.S. troops in Europe. There had already been cases of this
influenza in the U.S. training camps, and historians believe that the
first outbreak can be dated to March, 1918, and traced to Camp Funston,
Kansas. The disease spread quickly among the troops in the cramped and
unsanitary quarters of the trans-Atlantic troopships, and, as a
consequence, many were carriers when they disembarked in France. They
carried the first wave of the influenza epidemic of 1918-1919 to Europe.
That first wave spread quickly through Europe, affecting Allied troops
first and only then the soldiers of the Central Powers, thus making it
clear that the origin of the first wave had been the newly-arrived
American doughboys.
That first wave was unusual because it attacked the young, rather than the
elderly as was usually the case. When it was seen that very few people
over thirty fell ill, it was concluded that it was simply a recurrence of
the strain that had caused the 1890 epidemic. Those under twenty-eight
years of age had been born after the 1890 outbreak and had no acquired
immunity. Its symptoms were identical to those of 1890 and, since the 1890
epidemic had not been all that deadly, most people simply waited for the
outbreak to work itself out by infecting, and thus conferring immunity
upon, a sufficient portion of the population to arrest the further spread
of infection.

That first wave subsided in July/August of 1918, and only a few medical
statisticians noticed that the death rate among those who contracted the
virus had been much higher at the end of the outbreak than it had been at
the beginning. Moreover, those statisticians were among the medical
personnel of the Central Powers (Germany, Austria, and Turkey) and did not
share their information with their opponents. Looking back, Historians now
can see that a mutation in the virus had occurred and given rise to a new
strain. This mutation must have occurred somewhere far from the point of
introduction of the original strain. It may have occurred somewhere in
Eastern Europe but, in any case, took some time to work its way back to
the heavy concentration of population on the western war front.
The new infection reached the Western Front in September/October 1918 and
spread quickly through the troops in the area. The fighting ended on 11
November 1918, and many of those troops began returning home. Needless to
say, they carried the influenza virus with them.
It is clear that this virus was a quite different animal from its
predecessor and something quite new to the world. There seemed to be no
place where the population had an acquired immunity to this new strain.
Its symptoms were now different from the contagion that had preceded it.
The disease had become primarily a respiratory infection, and the death
rate was much greater than in either 1890 or during the first wave of
1918.

This second wave subsided in December 1918/January 1919, and a third wave
arose in March 1919. This third wave was not as dramatic or destructive as
the Winter contagion. It seemed to be simply a recurrence, attacking those
who had been weakened by infections during the second wave. It tended to
linger, however, and caused a number of deaths among a more vulnerable
population.

The title of "The Great Influenza Epidemic of 1918-1919" should be probably
restricted to the second wave. It was a mutation of the 1890 strain of
influenza that had been reintroduced to Europe by troops newly-arriving from
the United States. The mutation most likely occurred somewhere in eastern
Europe, spread to the western front at a time when troops were heading home,
and so was quickly carried throughout the world. The fact that so few people
in the United States had an acquired immunity is a very strong argument that
the epidemic that began in the United States in the Autumn of 1918 was new
to the American population.

In 1977 or 1978 (I'm sorry, but my memory fails me), epidemiologists noted
that the human antibodies generated by the 1918-1919 strain of influenza
were very similar to those of pigs that had survived swine flu. When an
outbreak of swine flu occurred, some people got very upset by the
possibility that the 1918-1919 strain of influenza had mutated out of or
into the virus responsible for swine flu, and that the outbreak of swine
flu somehow or another signalled the possible return of the 1918-1919
strain of human influenza. The federal government initiated an almost
hysterical crash program to develop a human vaccine against swine flu and
to vaccinate everyone in the country, and a great deal of popular concern
was generated. There were lots of stories and statistics about the
epidemic of 1918-1919, and the subject began to assume the character of a
Billy Goat Gruff story. It became a popular topic for uninformed
speculation, and many articles and accounts that appeared at the time
resurface periodically. I suspect that a history of this entire episode
would make very interesting reading.

It is difficult to estimate the total death toll. Supposedly, thirty
million people died of influenza during the outbreak, but the virus of the
second wave affected the respiratory system and broke down the mucus
membrane of the bronchial tubes and lungs. This laid people open to
contracting pneumonia, bronchitis, tuberculosis, strep and yeast
infections, and a number of other debilitating or deadly organisms. No one
can tell how many died of these secondary infections, especially since
numerous ex- combatants had suffered respiratory damage from poison gas
and contracted the same illnesses, and because the deaths from these
secondary infections were often the result of prolonged illnesses and took
place long after the Great Epidemic was over.

What is certain is that the death toll would have been much greater had it
not been discovered that a recently developed pharmaceutical,
acetosalicylic acid (aspirin), acted to dull pain and
discomfort and also was effective as an anti-inflammatory. It allowed
patients to rest more easily and lessened the high fevers that were
characteristic of the disease. It was, for these reasons, quite effective
in the treatment of the infection. The patent for aspirin was owned by
Bayer, a German firm, and most nations ignored Bayer's attempts to
maintain an artificially high price for their medication during this time
when the need for it was the greatest. The United States was, to the best
of my knowledge, the only country willing to sacrifice the lives of its
citizens to protect the property interests a company that had been a
prominent contributor to its enemy's war effort. Aspirin was sold in the
United States for about 2.5 cents per tablet, the equivalent of about
fifty cents each in today's currency, a rather high price for someone sick
and so without work. It has been estimated that mortality in the United
States was ten to twenty percent higher than it would have been if aspirin
had been reasonably priced.

This, coupled with the beginning of the so-called Red Scare
and fears of generalized labor violence such as that of the Molly
Maguires a generation earlier, and a sudden burst of inflation,
started the post-war era off somewhat ominously in the United States.
Things were much worse elsewhere. The Allies had blockaded Germany during
the war, and starvation among the civilian population of Central Powers
had been one of the reasons for the Powers' decision to capitulate. Famine
continued in eastern and central Europe. The Bolsheviks under the
leadership of Lenin had seized control of Russia, but
several Royalist insurrections broke out, and the Allied powers tried to
aid the insurgents in overthrowing the Communist regime. The
result was a prolonged and ghastly civil war. At the close of the First
World War and the struggles that followed, both the victors - except for
the United States and Japan - and the vanquished were exhausted and their
treasuries drained.

Nevertheless, some of the Western nations contrived, by using their
accumulated capital reserves, confiscating the remaining wealth of the
defeated nations, and by continuing the deficit spending that had financed
their war effort, to make the 1920's a period of extravagance, even if
such extravagance was enjoyed only by a small portion of the world's
population. This era of artificial plenty came to an abrupt end with the
collapse of the world's stock markets -- the Stock Market "Crash" of
August 1929 -- and the resultant disappearance of a significant
portion of the world's "wealth".

In order to understand how this occurred, one should understand the
curious way in which stock markets work. Let us consider an example. There
is a new company that needs $1000 to begin operations, so it sells one
thousand shares of stock for one dollar each. You pay one dollar and
become the proud owner of one share of stock worth one dollar. You must
remember that a share of stock is worth either what you paid for it or
what someone else is willing to pay you for it. Let us say someone comes
up to you and offers you five dollars for your share of stock and you
accept. The worth of a share of stock is whatever that stock can be sold
at, so the value of all of the shares of stock in that company is now five
dollars. Although only five dollars has changed hands, $4000 of additional
wealth has been created. If you then begin to regret having sold such fine
stock, you might take an extra five dollars of your own money and buy a
share of that stock for ten dollars. The market value of all thousand
shares of stock is now ten dollars and all stock holders are becoming rich
quite rapidly. As long as everyone is confident and does not wish to lose
out in the general enrichment, this sort of thing is well and good. But
all of this wealth is merely "paper wealth" that has been created by the
transfer of very small sums of real money. Suppose that the person who now
holds the ten dollars that you paid for your share of stock decides that
it would be unwise to buy any further stock. And further suppose that one
of your fellow stock holders decided to try to sell his share at ten
dollars. He would find that there were no buyers for ten dollars, or five
dollars or even one dollar. Your stock and that of your fellow stock
holders would have become worthless and $10,000 of wealth would have
vanished.

This sort of thing happens all of the time on a less dramatic scale. The
person who is willing to buy stock because he believes that people will
soon be willing to buy the stock for even more than he spent is called a
bull and someone who has decided that the value of stocks
will not increase and that he should not buy anything is called a
bear. What happened in 1929 is that some stock market
investors who had been bulls for the previous five or six years began to
worry that the good times might be coming to an end and turned into bears.
Once the prices of stock started falling, investors sold stock for
whatever price they could get, grabbed what money they could and held onto
it. This meant that stock prices continued to fall.
The Stock Market is more than a financier's guessing game, though. It is
one the means by which companies obtain the money they need. In 1929, many
firms that needed money in order to keep running found it impossible to
borrow any from banks and could not sell stock in their companies. Without
funds or the hope of acquiring funds, many companies went bankrupt. They
were unable to pay back any money they might have borrowed, and the banks
that loaned them the money, suddenly finding that they owed more money to
their investors than they were likely to receive from their debtors, also
went bankrupt. The bankrupt companies were forced to lay off their
employees at exactly the same time that their banks took away their
savings. So these workers now had neither a job nor an income nor any
savings, and so they could no longer buy anything. The businesses that
depended on selling to them no longer had a market, and so they went
bankrupt also and more people lost their jobs. The whole situation was a
very vicious circle.

Throughout the world, new leaders arose to replace those discredited or
overthrown as a result of the war, while leaders who saw an opportunity in
the weakening of Europe's resources and will arose among non-Western
peoples. Certainly there were ample signs among Europeans of
dissatisfaction with the way things had been, and were being, done, and
many were willing to embrace radical changes. Some among the intellectuals
turned to eastern religions, mystical cults, or praise of a life of
indolence and self-gratification. Among the working classes, some turned
to Communism, while others threw themselves into fascist
movements of one sort or another.

Fascism is difficult to define, but it was an important
force in the world between the wars. There were fascist parties in almost
every country, at least every Western country in the world, and the Second
World War was essentially a struggle between the fascist and non-fascist
powers. In a broad sense, Fascism seems as if it were an extreme form of
Romanticism, rebelling against the Realist
doctrines of the Communist nations and the middle class "democratic"
states that were, in spite of the changes wrought by the War, still only
continuations of the conservative regimes of the Congress of Vienna.
Fascist movements were centered upon charismatic leaders such as Mussolini
in Italy, Adolf Hitler in Germany, Francisco Franco in Spain, Salazar in
Portugal, Tojo in Japan, Peron in Argentina, men who promised simple
solutions to the complex problems of the day. These solutions usually
involved a return to a past glory based upon social and racial purity, a
concentration of power in the central government, an exaltation of the
state above the individual and an enforced return to some vaguely-defined
set of "virtues." The Fascist leaders usually ascribed their people's
sorry condition to a betrayal by former leaders, and they led popular
attacks upon those who had "conspired" against the state. They viewed war
as a positive good that would weed out the unworthy from the population
and exalt the "meritorious" survivors. The unstable nature of the fascist
states provided a constant background of uncertainty to the efforts by
many countries to recover from what amounted to economic paralysis. In the
end, it was the fascist powers that would lead the West out of the Great
Depression.

The most important economist of this period was John Maynard
Keynes (rhymes with "rains"). His view of economics was rather
simple. The economy consisted of people passing wealth from one to the
other. If they have too much wealth or pass it back and forth too rapidly,
the economy "heats up." Money and credit become worth less and so the
prices of commodities rise. If there is too little money and credit or if
it moves too slowly from hand to hand, the value of money and credit
increases and the price of commodities fall. The first situation is called
inflation and the second called recession or
depression, depending on how severe the drop in prices is
and how long the situation lasts.. Keynes's view was that it was that
government was responsible for keeping the right amount of money and
credit in circulation and the rate of circulation such that the economy
would neither "heat up" nor "cool off".

The problem was that government could not control this matter directly. If
people chose to keep their money and not buy anything. government should
not force them to do otherwise. Keynes understood this problem and felt
that the government had to use deficit spending, putting
more money into the economy than it took out, during recessions or
depressions. The government could do this by reducing taxes, but this
would not be effective in a situation in which people were simply hoarding
all of the money they could. So, said Keynes, the government should print
more money and so go into debt. The money should be used, if possible, for
public works and economic infrastructure (such as improved railroads,
hydroelectric dams, flood control projects, bridges, irrigation canals,
and the like) that would increase production in the long run and should
get money into the hands of the consumers so that they would begin to buy
again in the short run.

Those of you who have drawn water by using hand-pump probably remember
that one often has to pour some water into the top of the pump before it
will work effectively. This is called "priming the pump", and deficit
spending by governments in order to start a flagging economy moving again
is called pump-priming. How is one to pay for pump-priming?
Keynes said that the government would get the money back by raising taxes
when the economy was too "hot", and would be able to retire its
pump-priming debt and cool down the economy at the same time by taking
money out of circulation. Furthermore, he noted, the government would be
"buying" capital improvements when the price of such things was low and
would be paying off its debts with money that had been made "cheap" by
inflation.

This was, and is, an attractive approach to controlling the national
economy, but Keynes had no idea how much deficit spending would be
necessary to start a modern industrial economy working again. Most nations
used variations of Keynes's strategy. Benito Mussolini, the
Fascist dictator of Italy (1922-1945), built new highways and modernized
the nation's railroads. Adolf Hitler, the dictator of
Germany (1932-1945), built a magnificent new highway system (the
Autobahn, which is still in use) and subsidized a new auto company
(Volkswagen) that was to revolutionize Germany as Henry Ford's Model T had
revolutionized the United States. In America, President Franklin
Delano Roosevelt (1931- 1945) implemented a broad scheme of
recovery called The New Deal, involving social works (such
as social security, workman's compensation, the Writers Project, and the
like) and extensive programs of public works (Hoover Dam; Grand Coulee
Dam; the Tennessee Valley Authority, Lone Star Lake Dam in Douglas County,
Kansas and many other things), all accompanied by federal regulations to
ensure their proper application.

Despite the efforts to "reboot" the economy and the tremendous sums being
spent in this effort, the recovery of the world economy was agonizingly
slow. Hitler, for one, was not inclined to wait since he felt that
Germany's recovery was being unnecessarily slowed by the lack of
territories that the Allied Powers had taken away from Germany in the
aftermath of the First World War. He began to build an army, navy, and
airforce to regain territories by force if necessary. It took the other
Western nations quite a while before they realized that Germany's
investment in military power was too great to be justified merely by the
return of the "lost" territories it demanded.

When they finally did so, about 1938, they began feverishly expanding
their own military forces. The immense deficit spending on preparing for
and waging war was, in the end, the "pump-priming" that ended the Great
Depression. There was yet another flaw in Keynes's view of things,
however. Neither he nor other academics could have imagined how difficult
it would be for elected politicians to raise taxes even when post-war
inflation began. Besides, no one had asked how a nation was to finance a
state of war that would last forty years and more.

ASSIGNMENTS

REQUIRED ASSIGNMENTS

There is not a great deal of on-line material dealing with the Great
Depression, but you may find the series of discussions of modern history by
the BBC
useful. Still another site, entitled
The Great
Depression, touches on many of the topics we have discussed. Those of you who
are interested in the history of Germany should visit the multi-chapter history
of the rise to power of
Adolf Hitler.

RECOMMENDED ASSIGNMENTS

Professor Nix, of Georgia, is now about eighty years old and has been busy
writing down his memories of childhood, growing up and growing old. Some of
his memories are funny, some are sad, but, taken together, they give you
some idea of what sort of water has passed over the dam since 1920. The only
thing wrong with Professor Nix's
memories is that he keeps mentioning old songs that I remember quite
well but just haven't heard lately.

This text was produced and installed by
Lynn H. Nelson, Department
of
History, University of Kansas.
12 January 1998
Lawrence KS